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CareFirst Invests in Healthways Partnership

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Health insurance provider CareFirst strengthened its partnership with Healthways Inc. (HWAY - Analyst Report) by making a strategic investment of $20 million in the latter. The investment will bring further growth and innovation in CareFirst’s Patient Centered Medical Home (PCMH) program, which serves more than a million CareFirst members with an emphasis on patients with multiple chronic conditions.

Healthways provides services and technology to the PCMH program as well as Disease Management services to CareFirst members. With the additional investment, the companies expect further opportunities for growth in PCMH program.

CareFirst is an independent licensee of the Blue Cross and Blue Shield Association, a federation of 38 separate health insurance organizations and companies in the U.S. This non-profit organization serves 3.4 million people in Maryland, the District of Columbia and some areas of Northern Virginia. CareFirst contributed nearly $57 million to community programs in 2012.

HWAY provides focused and complete solutions which enable people to improve their physical, emotional and social well-being. The company’s programs are designed to encourage people to make favorable lifestyle changes, such as physical activity for elders at the fitness centers (SilverSneakers) or nicotine therapy via the on-line cigarette cessation program (QuitNet).

In the second quarter of the year, Healthways reported second-quarter 2013 loss per share of 3 cents, narrower than the Zacks Consensus Estimate and the company’s expectations of a loss of 5 cents per share. However, the result is worse than the year-ago earnings of 15 cents per share.

Revenues declined 4.7% year over year to $162.3 million in the quarter, trailing the Zacks Consensus Estimate of $171 million. However, upon exclusion of the two terminal contracts, revenues improved 11.7% from the prior-year quarter.

HWAY affirmed its sales guidance for 2013. The company continues to expect sales in a band of $710 million–$750 million, reflecting growth of 5%–11% year over year. It expects higher revenues for 2013 despite a drop of $80 million on account of the termination of two contracts. Healthways forecasts higher sales in the second half of 2013 as fresh contracts inked in 2012 take off in the upcoming quarters.

However, Healthways tweaked its outlook for bottom line to reflect the effect of its cash convertible senior notes due 2018. The company expects earnings per share of about 18 cents–28 cents compared with prior outlook of 25 cents–35 cents for 2013.

Healthways currently carries a Zacks Rank #3 (Hold). Other scrips that are worth a look in the medical services industry include BG Medicine, Inc. , Covance Inc. and PAREXEL International Corporation (PRXL - Snapshot Report). All of them carry a Zacks Rabk #2 (Buy).

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